Swiss Economy Can Avoid a Major Recession

So far, in the wake of global financial crisis; the Swiss economy has performed better than its European neighbors. What is behind this advantage and can Europe’s eight largest economy avoid significant deterioration?

In fact, although Switzerland's leading economic indicators fell to the lowest level in more than five years in December and manufacturing contracted at the fastest pace since at least 1995, it happened at more gradual pace than in any other major economy. Moreover, even though the unemployment rate has been steady rising, it reached 2.9% in December; it's one of the lowest in Europe and below the natural rate of unemployment.

We continue also to believe that in spite of large losses in Switzerland’s biggest banks: UBS and Credit Swiss, the impact of credit crunch is likely to be weaker due to large current account surplus and a high savings rate. In addition, the deterioration of inflationary pressures has given recently a lot of room for monetary policy actions. As a result, The Swiss National Bank has cut the 3-month target rate to a four-year low of 0.5 percent.

Yet, the Swiss economy is not completely immune to slowing growth in Europe and in the United States since the export sector of the Swiss economy constitutes over 50% of GDP. In fact, the recent appreciation of the Swiss franc against the euro is harming foreign sales of products such as machines and precision instruments.

Swiss Economy Can Avoid a Major Recession

Anna Fedec,
2/11/2009 7:58:47 AM